What pigeons can teach us about FinTech

Pigeons are not renowned for the computing power of their brain. Yet they led the FinTech evolution (1). The use of birds to send financial information illustrates how a simple technological innovation changed the way people transact business. It is not rocket science, yet it rocked a whole industry.

This article focuses on three aspects of FinTech: what they do, why it matters, and how it is evolving.

Picking a grain at a time

What most successful FinTech have in common is the use of innovative technologies to simplify their clients’ life. They typically focus on one particular client’s challenge at a time. It is not so much about being client-centric as about starting with a customer’s need in mind. To identify this gap, structured approaches such as Design Thinking are implemented. A FinTech will then unbundle a value chain, take apart one particular step, and substitute it with its own solution.

Take the example of one of the most successful FinTechs, PayPal. They focused on one specific pain point in the client experience: settlement. While their back-end technology is far from straightforward, they delivered simplicity and convenience to their users.

Untrained pigeons get lost

Technologies driving the FinTech space, from artificial intelligence to blockchain, cloud computing, or data analytics, are occasionally perceived as a threat. The substitution of men by machines. While one day we shall all have more time for hobbies, for now, those technologies are taking away from us painful activities: repetitive tasks, time-sensitive execution, and mind-draining computation.

A caveat. Users need to keep up to speed with the basics of each technology. Think data literacy. You do not need to understand how a car engine functions but you are assumed to know how to drive it. Sufficient resources are available to brush away excuses. From executive education to MOOC providers like Coursera or edX, even free and high-quality programmes such as the one designed by the University of Hong Kong already give an excellent overview of the FinTech space and its associated technologies.

Putting the cat among the pigeons

The word “disruption” invokes fear, hence it is catchy for headlines. However, as it stands, the FinTech revolution is an evolution. In most cases, behind us is the idea of tearing apart large incumbents in the financial industry. Instead, collaboration is favored. “You have the clients, I have a solution, let us work together.”

The cooperation between established companies and technology-providers is taking different shapes: from investing in start-ups, sourcing knowledge directly from universities, or working with them on accelerators. By providing mentorship to young entrepreneurs, getting them access to specific departments, large incumbents can assess the usefulness of new technologies and directly implement them. This type of collaboration is also an opportunity for employees to get involved, understand what new technologies can bring, and develop innovative ways to solve our clients’ challenges. 

FinTechs are providing us with new ways to address our clients’ needs, from process to products, and even uncover and fulfil needs people did not even know they had, their latent needs. As users nd as employees, we can harvest the benefits of those new technologies by continuously updating our skills and maintaining an awareness of emerging technologies. 

There is a “but”. A darker, or brighter corner of the market and a blind spot for many: TechFin, large technology companies stepping into the finance arena. Think of the FAANG(2) in the West or the BAT(3) in China. They already have your data, they are skilled at mining it, and they know part of your life better than you do. Just ask Alexa.

(1) The telegraph is more widely accepted as the beginning of the FinTech (r)evolution

(2) Facebook, Apple, Amazon, Netflix, Google

(3) Baidu, Alibaba, Tencent

This article was first published on LinkedIn, May 16, 2019.